U.S. stocks mixed after CPI release; optimism over trade deal remains

Investing.com -- U.S. stocks traded in a mixed fashion Tuesday, as investors digested cooler-than-expected inflation data, following on from a trade deal between China and the U.S., the two largest economies in the world. 

At 09:35 ET (13:35 GMT), the Dow Jones Industrial Average fell 200 points, or 0.5%, while the S&P 500 index traded 5 points, or 0.1%, higher, and the NASDAQ Composite gained 90 points, or 0.5%.  

Some investors have decided to bank gains Tuesday after the main averages posted their best days since April 9 on Monday.

However, there still remains a great deal of optimism that a relative trade truce between the world’s two largest economies will avert a severe economic downturn.

Washington agreed to substantially cut its elevated tariffs on Beijing to 30%, after they were raised to at least 145% by President Donald Trump. China, meanwhile, said it would slash its levies to 10% from a retaliatory level of 125%. Both countries also said they would suspend the tariffs for 90 days.

The U.S. will also bring down tariffs on lower-value products imported from China, further cooling a trade spat with Beijing.

This news prompted economists at Goldman Sachs to cut their estimated risk of a recession in the U.S. to 35% from 45%.

Inflation shows signs of cooling 

The latest consumer price index, released earlier Tuesday, indicated that inflation remained contained, even as economists assessed the impact of rapidly-evolving U.S. trade policies.

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The headline consumer price index grew by 2.3% in the 12 months to April, compared with expectations that it would match March’s pace of 2.4%. It was the lowest rate of inflation since February 2021, shortly before pent-up pandemic-fueled demand and supply constraints led to soaring prices. 

Month-on-month, the measure came in at 0.2% following a decline of 0.1% in the prior month, according to Labor Department data on Tuesday. Estimates had called for an uptick of 0.3%.

Core inflation, which strips out volatile items like food and fuel, also rose 0.2% on a monthly basis, below the 0.3% expected, and 2.8% annually.

While Monday’s trade deal does mark a deescalation, tariffs on China are still well above levels seen prior to April 2 - a trend that could underpin U.S. inflation. 

The inflation data is widely expected to factor into the Federal Reserve’s plans for interest rates, after the central bank recently signaled that it saw no near-term changes in rates. 

China airlines return to Boeing - Bloomberg 

In the corporate sector, Boeing (NYSE:BA) stock rose after Bloomberg reported that China has removed a month-long ban preventing local airlines from taking delivery of its planes, in another possible easing of the trade tensions between Washington and Beijing.

Government officials have begun instructing local carriers and government agencies this week that deliveries from the U.S. planemaker can resume, the Bloomberg report said, citing people familiar with the matter.

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Elsewhere, Unitedhealth (NYSE:UNH) slumped after the health insurer suspended its full-year financial forecast due to a bigger-than-anticipated spike in medical costs, while CEO Andrew Witty has decided to step down from the helm of the company.

Under Armour (NYSE:UAA) stock rose after the sportswear maker’s quarterly revenue topped expectations, even after it reported a first-quarter loss. 

Coinbase Global (NASDAQ:COIN) surged, with the crypto exchange set to join the S&P 500 index, replacing Discover Financial Services (NYSE:DFS) before the start of trading on May 19. 

Crude near two-week high 

Oil prices rose Tuesday, trading near a two-week high, as traders digested recent announcements around the China-U.S. trade deal.

At 09:35 ET, Brent futures gained 0.8% to $65.47 a barrel, and U.S. West Texas Intermediate crude futures rose 1% to $62.55 a barrel.

Both contracts rose by about 1.5% on Monday, adding to the previous week’s gains and notching their highest settlements since April 28.

Despite the ratcheting down in tensions between Washington and Beijing, plenty of uncertainty still exists as the underlying factors that led to the dispute remain, including the U.S. trade deficit with China.

Ambar Warrick contributed to this article.

 

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